AML Glossary – “K”

In 1992, the U.S., U.K., France, Canada, and the Netherlands spearheaded a gathering of 17 Caribbean nations in Jamaica. At its conclusion, the nations issued the Kingston Declaration on Money Laundering, which expressed solidarity with the 1988 United Nations Convention on Illicit Trafficking in Narcotic Drugs. The declaration also agreed to implement the FATF 40 Recommendations and the 19 Recommendations issued at the 1990 Aruba meeting that created the Caribbean Financial Action Task Force. See www.cfatf.org.

Knowledge

Mental state accompanying a prohibited act. The Interpretive Notes to Recommendation 3 of the FATF 40 Recommendations of 2012 says that countries should ensure that the intent and knowledge required to prove the offense of money laundering is consistent with the standards set forth in the Vienna and Palermo Conventions, including the concept that such a mental state may be inferred from objective factual circumstances. The exact definition of knowledge that accompanies an anti-money laundering act varies by country. Knowledge can be deemed, under certain circumstances, to include willful blindness, i.e., “the deliberate avoidance of knowledge of the facts,” as some courts have defined the term: for example, when a bank officer proceeds with a transaction while deliberately ignoring the potential illegal origin of the funds involved.

Know Your Correspondent Bank (KYCB)

A set of anti-money laundering control policies and procedures employed in determining the beneficial owners of a respondent bank and the type of activity that is “normal and expected” for the bank. Know Your Correspondent Bank is a key tool in detecting suspicious activity and money laundering because correspondent accounts are often used as conduits to launder criminal proceeds internationally. The USA Patriot Act included statutory provisions that bear directly on the procedures U.S. financial institutions must follow in connection with foreign correspondent banks.

Know Your Customer (KYC)

Anti-money laundering policies and procedures used to determine the true identity of a customer and the type of activity that is “normal and expected,” and to detect activity that is “unusual” for a particular customer. Many experts believe that a sound KYC program is one of the best tools in an effective anti- money laundering program.

Know Your Employee (KYE)

Anti-money laundering policies and procedures for acquiring a better knowledge and understanding of the employees of an institution for the purpose of detecting conflicts of interests,
money laundering, past criminal activity and suspicious activity. KYE is a key tool in detecting suspicious activity because employees can be accomplices of money launderers.